California and the West | Michael Hiltzik / GOLDEN STATE

A Radical Healthcare Solution

Business leaders, acting in what they regard as their economic self-interest, have torpedoed every attempt to improve the nation's ridiculously ineffective healthcare system for decades. There hasn't been a significant reform since Lyndon B. Johnson expanded Medicare and Medicaid in the 1960s.

The chickens are finally coming home to roost.

Private industry assumed financial responsibility for employee healthcare after World War II. It no longer wants the burden. The crippling cost has been cited as a factor in the bankruptcies of United, Northwest and Delta airlines. Unscrupulous employers leave their workers medically stranded, thus undercutting competitors who try to do the right thing. (Think of the Wal-Mart effect in retail.)

The number of uninsured citizens is growing -- more than a fifth of all non-elderly Californians, or 6.6 million persons, lack coverage -- and the number of those insured whose benefits are being cut back by their employers is growing even faster.

So it shouldn't be surprising that solutions once dismissed out of hand are suddenly getting a closer look. The most appealing is a single-payer system, which would replace today's jigsaw puzzle of private insurance, public programs and nothing with a government-run healthcare program. In California, that option is being pushed by state Sen. Sheila Kuehl (D-Santa Monica), who says she senses growing, albeit still insufficient, support around the state after three years of proselytizing.

Kuehl's plan is a work in progress. (She hopes to draft a full-fledged version next year.) Her basic proposal is for the state to finance comprehensive health coverage for all residents through a tax surcharge. Private insurers would be barred from selling equivalent coverage, but could market supplemental policies for services not on the state menu. An elected commissioner would establish benefits, set payments for providers, negotiate prescription drug deals, and so on.

Kuehl says her program would achieve universal coverage while cutting more than $8 billion from the medical costs of state government, employers and families, which are projected to reach $184 billion next year. (Her figures come from an analysis by the Lewin Group, a Virginia consulting firm, paid for by single-payer advocates.)

Hers is a radical solution. But many of the proposed alternatives in Sacramento merely involve letting insurance companies sell "affordable" strippeddown medical plans to workers. These remind me of my home earthquake policy, which won't pay for most of the damage I might incur, but at least it's cheap.

Critics of single-payer plans say they're inefficient -- the wait time for CAT scans in Canada averages a few months, to repeat a common rap on that country's program. But such criticism assumes that the alternative is a system in which all patients have instant access to all the treatment they need. That system doesn't exist in the United States, where even the insured can suffer long delays for diagnostic procedures and treatments, and the uninsured are lucky to get emergency room care.

Among single-payer's virtues is that it cuts private insurers out of the loop. These companies exist largely to convert premium dollars into profits, sometimes at a rate of 10% or more. They win praise from Wall Street when they reduce the share of the premium dollar spent on medical treatment.

It's true that the very notion of a government system gives some people the willies. "Considering our experience with having Congress run Medicare and Medicaid, I don't think any physician or knowledgeable patient would say, let's have them run it all," says Jack Lewin, chief executive of the California Medical Assn. (He's not connected to the Lewin Group.)

But the main objection doctors and hospitals have to those programs is that their reimbursements are too low. On the plus side, Medicare's administrative costs are less than 2% of its benefit payments; for some private insurance plans, the ratio is 25%.

Still, even if one were to accept that a single-payer program would improve on the crumbling system we have today, there's reason to doubt that it can work in a single state, even one with California's immense bargaining power. As long as the rest of the country is operating by different rules, California will struggle with federal bureaucrats doing business the old way. (The state will need government waivers to absorb federally funded programs into its system.)

By replacing healthcare premiums with an employer-employee tax, Kuehl's plan might reduce overall costs for employers who already offer comprehensive coverage, but it will raise costs for those that offer skimpy plans or none at all. This will anger small businesses and lobbyists for big skinflint companies. (Surprise: The California Chamber of Commerce has already labeled Kuehl's proposal a "job killer.") Such competitiveness issues can't be solved except by nationwide healthcare reform.

Another concern is how the system will handle political pressure. Think it's tough to close an urban firehouse? Wait until the state healthcare czar tries to close a neighborhood hospital. Of course, such decisions tend to be made now by insurance executives thousands of miles away; empowering a publicly accountable state official to weigh the pros and cons might be a step forward.

Kuehl's plan isn't perfect, but perfection is elusive in medicine, inside the hospital and out. It is an attempt to fix a failing system in one fell swoop, rather than with stopgap measures that will merely delay the reckoning. At the very least, it should focus the debate. As Kuehl told me this week, "We need to do more than nibble around the edges."

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Golden State appears every Monday and Thursday. You can reach Michael Hiltzik at golden.state@latimes.com and read his previous columns at latimes.com/hiltzik.